Phoenix pay increases targeted by DiCiccio

Phoenix officials haven't started contract negotiations with public-employee labor groups yet, but already one councilman wants to take pay raises and bonuses off the table.

City Councilman Sal DiCiccio of Ahwatukee said that as city officials prepare budget estimates for the 2012-13 fiscal year, they should exclude money for employee merit pay and longevity bonuses -- forcing the issue to be cut from contract talks dictating employee compensation for 2012 to 2014.

City officials usually don't vote on the budget until after public hearings are held in April. But DiCiccio said if the council discusses whether the raises and bonuses are included as the city prepares budget estimates in January, it will give the public ample notice to weigh in on discussions.

By including pay raises and bonuses in budget estimates "the city is negotiating in bad faith on behalf of the taxpayer," DiCiccio said. "It gives the unions the power to demand the pay raises right off the bat."

Over the summer, some members of the City Council were upset that city management didn't do a better job of telling the public that nearly $29 million in raises and bonuses were included in the budget for the 2011-12 fiscal year. The debacle pushed elected officials to call for a zero-based budgeting system, which the city will implement as it plans for the 2012-13 fiscal year.

"Since merit pay and longevity pay are both a part of the current council-adopted pay plan, they are assumed to continue for the purpose of developing the preliminary expenditure estimates," Assistant City Manager Ed Zuercher wrote in a memo to DiCiccio.

But city management expects to adjust that number based on how labor negotiations turn out and what elected officials decide. And it's too soon to say how much eliminating merit raises and longevity bonuses will impact the budget or city services and programs.

"At this point we don't know what (service and program) restorations might be possible to be recommended by departments and management," Zuercher wrote in a memo to the elected officials. "We first have to develop the baseline budget with projected revenues and expenses and then add in labor agreements. After that, we will know whether restorations or cuts are needed to balance the budget."

Budget and Research Director Mario Paniagua said city officials still don't know whether there will be a deficit or surplus. Paniagua also said it's standard practice for city officials to base total compensation costs in preparing budget estimates for the coming year on the current labor contracts.

"What we put in for our budget estimate is not intended to influence where negotiations go, but we do need to estimate something," Paniagua said. "The step pay and merit is in place until the council enacts a new pay ordinance."

In the 2010-11 fiscal year, employee costs were estimated to be $1.4 billion of the city's $2.4 billion operating budget.

Councilman Bill Gates said the timing of labor negotiations makes it difficult to plan expenditures for the coming budget year, but the city should have a "true discussion" about spending priorities. Gates wants to see a detailed list of the different elements of employee compensation and the price tag for each, creating a "buffet" of options.

"I'm fine with putting different options on the table as long as you have dot points so people can clearly see what the spending options are," Gates said. "We can have the discussion in public and say, 'What is important? Longer library hours, merit increases or a combination of both?' "

Gates said being as "transparent" as possible could help the city avoid the controversy over pay raises and bonuses it experienced last year.

Luis Schmidt, vice president of the American Federation of State, County and Municipal Employees Local 2384, said budget estimates are a guide for negotiations and can change after the contracts are set.

He said two years ago, the unions voted to cut wage and benefits by 3.2 percent, saving the city more than $100 million over two years. Schmidt said he's confident the city and unions can come to an agreement that would be good for employees and taxpayer but worries about the City Council voting on elements of the budget before talks begin.

"The council doesn't negotiate the contracts," Schmidt said. "That's the city manager's job. They can give direction but voting on a budget now would be dictating talks and that would be negotiating in bad faith."

Councilman Michael Nowakowski said Phoenix should hold off on any votes until it has a firmer picture of the proposed 2012-13 budget.

He also warns that there are legal issues tied with all the compensation decisions because they are outlined in contracts.

"It's easy to say take this away and take that away, but there are legal bonds we have to pay attention to," Nowakowski said.

The Phoenix City Council usually gets preliminary budget numbers for the coming fiscal year in January and votes on a trial budget in March. Final budget votes take place in the summer.

"Some people may say you don't want to take votes on the budget before it is adopted, but this is one where we've got to," DiCiccio.